Saturday, October 30, 2010

This weekend, Timmy took a big doo doo on the rest of the World as he pressed fellow Finance Ministers into (in theory) setting mechanisms to address trade balances (which means export countries need to strengthen their currencies against the dollar) while importing countries (like US) should not try to manipulate their own currency. Well, that sounds reasonable EXCEPT, before the ink is even dry on the G20 release, Timmy flies off to China to get them to commit to revalue the Yuan, which is pegged to the Dollar and effectively DE-values the dollar in an entirely manipulative manner.

No, WE didn’t manipulate the Dollar, China did. We only told them to manipulate their currency which is tied to the dollar, so it’s not the same thing at all as us manipulating the dollar and —- oh my God Tim, how can you sleep at night???

So good morning, America, how are ya? I’ll tell you how you are, you are 1% poorer than you were on Friday as the Yen rises to 80 to the Dollar and the Euro rises to $1.41 and the Pound hits $1.58. That drive oil back over $82.50 and gold back to $1,350 and copper hit $3.89, up from $3.75 on Friday - that’s 3.5% inflation of a basic material OVER THE WEEKEND! That annualizes out to about 1,000% but let’s be fair and say this only happens on weekends and call it 52 x 3.5% for 182% - hyperinflation accomplished! Of course, we don’t need 182% increases in commodities to achieve hyperinflation, hyperinflation is anything over 26% and our Dollar is down 15% since May and that’s 5 months so we’re heading for 36% over 12 months already.

Friday, October 29, 2010

In the popular view, a coup d'etat is a sudden event, over in a few hours or at most days, a drama played out in impoverished Third World nations. The stealth coup which has occurred in the U.S. is an entirely different kind of coup--one that has operated in stealth mode for the most part, a process of gradual infiltration and opportunistic grasping of key levers of dependence and control.

Is there validity to the concept that the USA has undergone a coup? Certainly democracy as it is defined by most people has been moved further away from their vote. Direct representation of the people is no longer a feature of American democracy ... the peoples wishes are filtered through structures, party machines, lobbyists, pressure groups and political elites.

Thursday, October 28, 2010

Finance chiefs from South Korea to South Africa signaled they may act to slow gains in their currencies, just four days after the Group of 20 vowed to soothe trade tensions in the $4 trillion-a-day foreign-exchange market.

Asian currencies fell to a one-week low after Bank of Korea Governor Kim Choong Soo said today that measures to mitigate capital flows could be “useful.” Hours later, the rand dropped as South African Finance Minister Pravin Gordhan said his government will use part of higher-than-expected tax revenue to build foreign reserves as it attempts to weaken the currency.

The shifts suggest G-20 members will keep trying to defend their economies from the slide of the dollar and capital inflows even after the group promised Oct. 23 to refrain from “competitive devaluation” and to increasingly embrace market- determined currencies.

“The G-20 made a vague pledge not to manipulate currencies much, but there was no mechanism to ensure that each country will not keep taking unilateral measures,” said Win Thin, global head of emerging markets strategy at Brown Brothers Harriman & Co. in New York. “It’s every man for himself.”

Hopes of a budget deal in Portugal collapsed after marathon talks between the minority government of socialist premier Jose Socrates and conservative leaders ended in acrimony.

Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will "plunge the country into a very deep financial crisis".

Meanwhile, Ireland has announced fiscal retrenchement of €15bn over the next four years, twice the original plan. It is already cutting public wages by 13pc.

John Fitzgerald from Ireland’s Economic and Social Research Institute said there is a risk that austerity tips the economy into a downward spiral, comparing it to an overdose of "chemotherapy" that does more harm than good.

Finance minister Brian Lenihan said the country had no choice. "The cost of borrowing is high and rising, and if we do not act soon to live within our means, people may stop lending to us. We will not fool the markets for an instant if we seek to defer any longer what evidently needs to be done now. The Irish people will have to accept cuts in public expenditures and higher taxes," he said.

Wednesday, October 27, 2010

The past five days were the worst of my entire career. No, nothing's wrong with our business, it's doing well. We're having our best year ever, in fact. And no, it wasn't a bad week because of my stock picks – they're doing fine, too. Many of my long-standing predictions about silver, gold stocks, GE, etc. are coming to fruition. That's the problem, actually...

This week was the worst of my career because too many things that should NEVER happen in U.S. capital markets happened this week. The U.S. Treasury Secretary promised not to devalue the dollar... immediately before leaving to attend a G-20 meeting, where the primary agenda is lowering the exchange value of the U.S. dollar. This is terrifying... As soon as our creditors finally realize we're not going to stop printing money, we'll suffer a huge run on the dollar. I've been warning about this constantly since 2008, in a series of essays called "The End of America."

None of our leaders – Democrat or Republican – seem to understand that, as the world's largest debtor, we're playing with fire when we expand the Fed's balance sheet. Why? Just look at the numbers. Currently, the total debt – that's public, corporate, and personal – in the United States is more than $60 trillion. That's $186,000 per person in the United States or $750,000 per family. Last year, total debt increased by $3 trillion – roughly eight times faster than GDP. Normally in a recession, you'd expect to see total debts fall. But not here. Our government believes it can borrow an unlimited amount of money and then print more to repay it. That's like lighting matches next to gas tanks.

The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used.

More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails – none of which Pittman requested. They were so heavily redacted that most of what's left are everyday messages such as "Did you just try to call me?" and "Monday will be a busy day!"

None of the documents answers Pittman's request for "records sufficient to show the names of the relevant securities" or the dates and terms of the guarantees. Even so, the U.S. government considers the collection of e-mails a partial response to an official request under the federal Freedom of Information Act, or FOIA. The Justice Department in July cited an increase in such responses as evidence that "more information is being released" under the law.

President Barack Obama vowed to usher in a new era of open government. On Jan. 21, 2009, the day after his inauguration and a week before Pittman submitted his FOIA request, Obama directed agencies to "adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA."

BEIJING, Oct 26 (Reuters) - Dollar issuance by the United States is "out of control", leading to an inflation assault on China, the Chinese commerce minister said in comments reported on Tuesday.

Chen Deming, speaking at a trade fair in southern China, said that exporters had done a good job of preparing themselves for exchange rate changes as well as rising labour costs, but were suddenly confronted with new challenges.

"Because the United States' issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen was quoted as saying by the official Xinhua news agency.

Chinese officials have criticised U.S. monetary policy as being too loose before, but rarely in such explicit language.

Tuesday, October 26, 2010

Our call for closing down control frauds and stopping the foreclosure frauds typically meets with three objections. First, it is claimed that while there were some bad apple lenders, much of the fraud was committed by borrowers. Our proposal would let fraudulent borrowers remain in homes to which they are not entitled, punishing the banks that were duped. Second, the biggest banks are too important to foreclose. And third, it is not possible to resolve a "too big to fail" institution.

Monday, October 25, 2010

With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...

Sunday, October 24, 2010

After months of US bitching and moaning about China's so called unfair exchange policies, when it is the US Fed which is the biggest currency manipulator in the world by orders of magnitude, one country finally had the guts to stand up and call out Tim Geithner on his endless bullshit. At the G-20 meeting, per Bloomberg, German Economic Minister Rainer Bruederle said that the Fed's "push toward easier monetary policy is the “wrong way” to stimulate growth and may amount to a manipulation of the dollar. Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate." The fact that China was smart enough to peg its currency to the most rapidly devaluing currency in the world is a different story altogether, and merely confirms that they are leap and bounds more sophisticated in their monetary policy than anyone gives them credit for. If Geithner wants to prevent a relative depreciation of the Yuan versus all other currencies in the world (especially the EUR, against which it continues to be in freefall), the answer is simple: stop bloody printing!

After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:

A government review of botched foreclosure paperwork so far has found that the problems do not pose a "systemic" threat to the financial system, a top Obama administration official said Wednesday.

Yes, that's right. HUD reviewed the "paperwork" problem to see whether it threatened the banks -- not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.

The Justice Department is leading an investigation of possible crimes involving mortgage fraud.

That language was carefully chosen to sound reassuring. But the fact is that despite our pleas the FBI has continued its "partnership" with the Mortgage Bankers Association (MBA). The MBA is the trade association of the "perps." It created a ridiculous on its face definition of "mortgage fraud." Under that definition the lenders -- who led the mortgage frauds -- are the victims. The FBI still parrots this long discredited "definition." That is one of the primary reasons why -- in complete contrast to prior financial crises -- the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.

Saturday, October 23, 2010

There’s been plenty of recent media attention to the prospect of investor lawsuits over fraudulent mortgages and mortgage securities. But investor lawsuits against mortgage servicers could be even more damaging than these other lines of legal inquiry. The four largest banks hold nearly half a trillion dollars worth of second-lien mortgages on their books—loans that could be decimated if investors successfully target improper mortgage servicing operations. The result would be major trouble for the financial system. The result would be major trouble for too-big-to-fail behemoths.

Mortgage servicers are the banking industry’s debt collectors. They accept payments and forward them along to investors who own mortgage securities– servicers themselves don’t actually own the mortgages they handle. This is a recipe for trouble for a variety of reasons, but one of the biggest problems is the fact that the nation’s four largest banks also operate the four largest mortgage servicers. Bank of America, Wells Fargo, JPMorgan Chase and Citigroup service about half of all mortgages in the United States. They also have multi-trillion-dollar businesses whose interests often conflict with those of mortgage security investors.

Different directions: Tim Geithner of the US (above centre), with Christine Lagarde of France (left) and the European Central Bank’s Jean-Claude Trichet (behind) line up with fellow G20 central bankers and finance ministers in Gyeongiu, South Korea

Suppose they gave a summit and nobody came? When the first heads of government meeting of the Group of 20 nations was held in Washington in November 2008, there was a fierce fight for invitations. Spain, not quite big enough to join the gang, resorted to ringing round former Latin American colonies to lobby for inclusion.
But in the run-up to this week’s meeting in South Korea of finance ministers and central bankers from the 20 leading nations, it was revealed that senior representatives from Brazil, one of the biggest beasts of the emerging market world, would not be turning up. In a savage irony, given the G20’s aim to head off a global currency war and strengthen the global economy, finance minister Guido Mantega was too busy working on his country’s own exchange rate problems to attend. Even more poignantly, a month ago he was the first G20 minister to warn of a currency war.
More worrying than a single act of truancy – from a minister whose country is, to be fair, in the throes of an election campaign – is the disillusionment apparently creeping through the very emerging market governments the G20 was meant to empower.

Friday, October 22, 2010

The United States conducts monetary policy the same way it conducts foreign policy; unilaterally. When Fed chairman Ben Bernanke signaled last week that he was planning to restart his bond purchasing program (Quantitative Easing) he didn't consult with allies at the IMF, the G-20 or the WTO. He simply issued his edict, and that was that. The fact that the Fed's policy will flood emerging markets with cheap capital, pushing up the value of their currencies and igniting inflation, is of no concern to Bernanke. He operates on the same theory as former Treasury Secretary John Connally who breezily quipped to a group of euro finance ministers, “The dollar is our currency, but your problem.

Thursday, October 21, 2010

For now, Mr Osborne and the ruling government are the heroes of deficit hawks and supporters of a small state the world over. But Britain's conservatives have gambled heavily. If deep budget cuts amid economic weakness send the economy plunging back into recession, the government may be unable to make the cuts stick, and austerity could be discredited around the world. If disaster is avoided, it will strengthen the hand of fiscal conservatives everywhere. It would be an exciting experiment to watch if so many livelihoods weren't caught in the balance.

Remember: Thatcher preceded Reagan. And Toryism can be radical if the circumstances are dire enough. So much for all that talk of Cameron's wetness. And remember also that this is a Coalition government, in which the Liberal Democrats have also placed their bets on fiscal retrenchment - and the Labour opposition is in great disarray.

Foreclosure-gate is heating up and the mad scramble for what's left of $45 trillion in real estate is guaranteed to leave homeowners homeless, pension funds unable to pay their pensions and even some of the biggest banks insolvent. A great housing goat rodeo was created when some of the 65 million mortgages on U.S. homes didn't follow proper legal procedures;

Fraud by homeowners who lied on their loan applications

Fraud by banks who didn't follow proper legal procedures around the notarization and processing of mortgage documents

Fraud by investment banks who packaged this junk and resold it to unsuspecting pension funds

Pension funds promised returns to their pensioners they could never achieve

Lies, lies, lies and more lies. In this jockeying for position, the only thing guaranteed is Leona Helmsley's Law i.e. "Laws and taxes are for the little people". But the little people are starting to fight back in the U.S. and we'll get to that after we do a quick review of the situation at hand and how we got there.

In the old days, that would be pre-1980's, banks and savings and loans actually knew their customers and wrote and maintained loans on property themselves. Something similar to this scene from "It's a Wonderful Life" where George explains to his depositors, who came to withdraw their money, where it all went:

In those days, the corner bank knew the customer, the house, the depositors, they kept the records in a file cabinet at the bank -- it was where you went in to make your payment. Everyone knew that If you didn't keep up with the payments, the banker would foreclose on your property. That part hasn't changed.

If it wasn't already blindingly obvious that pervasive fraud was at the heart of the financial crisis and the ensuing foreclosure catastrophe, you would think that the latest news -- that banks have routinely been lying their heads off in the rush to kick homeowners off the properties they fraudulently induced them to buy in the first place -- would pretty much clinch it.

And yet the mainstream media still by and large hasn't connected the dots.

What we are seeing all around us are the continued effects of a vast criminal enterprise that has never been brought to account, employing a process that, as University of Texas economist James Galbraith explains, involved the equivalent of counterfeiting, laundering and fencing.

So the person with the right expertise to lead us here is a criminologist -- in particular William K. Black, one of the few effective regulators in recent history (during the savings and loan crisis of the late 1980s), a notorious knocker of heads and currently professor at the University of Missouri-Kansas City and author of the book, "The Best Way to Rob a Bank Is to Own One".

How much damage to the financial system should we expect from what is now commonly called the foreclosure morass, the developing scandal involving document robo-signing (and robo-dockets), completely messed up mortgage paperwork and highly publicized inquiries into accusations of systematic and deliberate misbehavior by banks?

The damage to banks’ reputation is immeasurable. They have undermined property rights — the ability to establish clear title is a founding idea of the American republic. They have mistreated customers in a completely unacceptable manner. If people doubted the need for a new consumer protection agency dealing with financial products — and the importance of having a clear-thinking reformer like Elizabeth Warren at its head — they have presumably been silenced by recent events. (If you need to get up to speed on the basics of this issue, see this series of posts by Mike Konczal.)

But what is the cost in terms of additional likely losses to big banks? The likely size and nature of these are leading to exactly the kind of systemic risks that the Financial Stability Oversight Council was recently established to anticipate and deal with.

It is hard to know how the precise numbers for losses will end up; so much uncertainty remains about the basic parameters of the foreclosure problem. A lot of smart people are looking for ways to sue the big banks — in particular to force them to take back (at face value) securities that were issued based on some underlying degree of deception.

In the wake of the fractious International Monetary Fund (IMF) meeting held October 9-10 in Washington, the descent into global currency and trade war has accelerated, with the United States playing the role of instigator-in-chief.

The US is deliberately encouraging a sell-off of dollars on international currency markets in order to raise the relative exchange rates of its major trade rivals, increasing the effective price of their exports to the US while cheapening US exports to their markets.

While largely responsible for the growing financial disorder, Washington is accusing China, in particular, of jeopardizing global economic recovery by refusing to more quickly raise the exchange rate of its currency, the renminbi (also known as the yuan). By working to drive down the value of the dollar, the US government and the Federal Reserve Board are placing ever greater pressure on the Chinese to revalue, ignoring warnings from Beijing that a rapid rise in its currency will harm its export industries, leading to mass layoffs and social unrest.

The protectionist cheap-dollar policy has an important domestic political function as well. It aims to divert growing public anger over the refusal of the government to provide jobs or serious relief to the unemployed away from the Obama administration and Congress and toward China and “foreigners” more generally. Among its most enthusiastic supporters is the trade union bureaucracy.

The US Commerce Department report Thursday that the US trade deficit widened nearly 9 percent in August, primarily due to a record $28 billion deficit with China, will be used to justify further trade war pressure against China.

The US policy and the growth of international tensions were on full display at the IMF meeting in Washington. US Treasury Secretary Timothy Geithner declared China’s currency to be undervalued and demanded that the IMF take a harder line against surplus countries, such as China, that fail to revalue their currencies and accept a reduction in their exports.

The phones we purchase are nice devices, we spend the money to get the best. Some people spend as much on their phone as they do their PC or maybe even more. So we should only be as respectful to them as we are with our home computers. Lookout Mobile Security watches over your device in three ways. This app has the options of being a security/anti-virus scanner, backing up your phone's internal data, and last but certainly not least a "Find my Phone" feature!

The first piece to this application that I mentioned was the security/anti-virus scanner. This will check every app you install and automatically updates when new dangerous apps are discovered. You are also able to run a full virus scan just as you can on any personal computer. This can be scheduled to run as often as needed, or only on a you say so basis. Scanning 143 applications for virus/malware only took about 45 seconds. Of course zero viruses were found

Pretty much everyone has gone through the horror of losing data. Thankfully, Google was very smart with their contact syncing when they developed Android. Even though that is an annoyance we won't have to deal with, it is still part of the backup option with Lookout, as well as backing up photos and call history. This information is stored on their own site and is accessible from any PC or phone as long as you know your log-in information. "Whether you accidentally delete data, your phone is lost, or even destroyed--your data is safe. You can restore any data with the click of a mouse. Changing devices is just as easy and your data can be transferred in seconds."

The British economist John Maynard Keynes may live on in popular legend as the world’s most influential economist. But in much of Europe, and most acutely here in the land of his birth, his view that deficit spending by governments is crucial to avoiding a long recession has lately been willfully ignored.

In Britain, George Osborne, chancellor of the Exchequer, delivered a speech on Wednesday that would have made Keynes — who himself worked in the British Treasury — blanch.

He argued forcefully that Britons, despite slowing growth and negligible bank lending, must accept a rise in the retirement age to 66 from 65 and $130 billion in spending cuts that would eliminate nearly 500,000 public sector jobs and hit pensioners, the poor, the military and the middle class because of what he insisted was the overwhelming need to reduce the country’s huge budget deficit.

French protesters are blocking the airport at Marseille and Lady Gaga has canceled Paris concerts amid a standoff over a bill to raise the retirement age.

The French Senate is wrapping up debate on the pension reform bill and could vote on it Thursday.

Students are planning nationwide protests to urge legislators to strike it down.

More than a quarter of the nation's gas stations are out of fuel because strikers have been blocking oil refineries and fuel depots. Lady Gaga's website says the singer postponed two Paris concerts "as there is no certainty the trucks can make it" to the show.

In Marseille early Thursday, passengers carried luggage on foot to reach the airport, blocked by union protesters.

Wednesday, October 20, 2010

For those of us who recognize the complicity of both Republicans and Democrats in our economic calamity, it has been satisfying to see the party establishments of each pummeled this election season. But as far as averting the currency crisis I describe in The Dollar Meltdown, the gold market says it’s too little, too late.

It’s no surprise that politicians hear only what they want to hear, but the Democrats take a new world indoor record for tone-deafness into the election. As the year opened with real unemployment at double-digit levels, all the President and the Democrat establishment could think about was passing Obamacare. They may be proud that they stayed on message, never mind that for most people a health care plan starts with a job and some savings.

With polls suggesting Republicans are set to re-take the House, it looks like the Democrats have a glass jaw to go along with that tin ear. And while scattered tea party victories gave the Republican establishment the thrashing it so richly deserved, the bad news is that none of it matters to our financial prospects. At least that’s the message from the gold market.

What’s the greatest potential threat to Britain’s national security in the early 21st century? Apparently, it’s no longer armed conflict with a hostile power—it’s cyberwarfare, according to the first published report, released this week, from Britain’s newly formed National Security Council. Forget the old simplicities of the Cold War era, where state enemies were easy to define: the country now faces a “different and more complex range of threats from myriad sources,” the council said. And at the head of the list of dangers is the “Tier One” risk of cyberwarfare.

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.

Reuters

A rare earth mine in China, which this week announced that it would cut its annual export quota for rare earths in 2011.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.

They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions.

China's exports and currency are blamed for the West's economic woes.Photo: EPA

The annual meetings of the International Monetary Fund in Washington are supposed to generate some kind of resolution. Instead, all we got was posturing and a slew of pious speeches saying that "co-operation is crucial".

What is now clear is that some of the world's leading economies are deliberately debasing their currencies in order to make their exports more competitive and lower the real value of the massive debts they owe the rest of the world.

On guard: a soldier on duty at the Beijing hotel hosting senior officials as they shape the country’s next five-year plan

China’s leaders can be excused for feeling a little embattled at the moment. They are reeling from this month’s award of the Nobel Peace Prize to jailed dissident Liu Xiaobo. Their currency policy is under attack from wealthier nations, most recently Japan. And Beijing finds itself under renewed pressure over territorial claims in the South China Sea that have caused unrest among some of its Asian neighbours.
In effect, the country is being challenged on central parts of its foreign policy, economic strategy and domestic political system – all at the same time. This in the week that 300 or so leading Communist party officials gathered for the annual meeting at which they are due to approve the outlines of the next five-year plan and settle some of the questions surrounding the next leadership transition in two years’ time.

Alluding to the "Non-Inflationary Consistently Expansionary" [NICE] decade just passed and coining a new acronym to describe the years ahead, he warned: "The next decade will not be nice. History suggests that after a financial crisis the hangover lasts for a while. So the next decade is likely to be a 'SOBER' decade – a decade of savings, orderly budgets, and equitable rebalancing... A sober decade may not be fun but it is necessary for our economic health."

Tuesday, October 19, 2010

Heads up NOOK owners, Barnes & Noble is readying another firmware update for you and your beloved e-Reader. The book giant says this will be the biggest update since the debut of the device last year and includes dramatically increased page turn speed, customized library organization, and password protection. Another much-desire feature, Reading Now, will let readers pick up wherever they last left off, across any and all devices. So if you leave your NOOK at home and want to pick up the Android app, there's no wasted time trying to get back to whatever page it was you last read. The 1.5 software update is expected to be available in November via WiFi or manual download through the support page.

In a related note, Barnes & Noble is also prepping a v2.3 update for the Android application that will see "Go To" specific pages, searching within a book, highlighting, notes, an updated homes screen and much more! If you haven't already, download NOOK for Android today!

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor believes equities are ready to drop into October-November and then rally again towards the end of the year.

Writing in the October edition of The Gloom Boom & Doom report, Faber says the Fed will start printing money again and that would create a negative sentiment driving markets down. He doesn’t however see a threat to the March 2009 lows.

"Maybe the stock market won’t be very happy about additional stimulus, more interventions into the free market," he recently said, "though anything could happen, but let’s put it this way that I do not think that we will go and breakdown below the March 2009 level".

Faber sees a downside target of no more than 950 on the S&P on the pullback. Any break below 1,000 will rattle the Fed, he says, and rather doubts Federal Reserve Chairman Ben Bernanke will allow further market declines once 1,000 is reached.

Dollar extremely oversold

The US dollar is extremely oversold and investor sentiment is very bearish. As a contrarian, I would not be short the dollar right now, Faber says in his October report.

Gold correction possible

Faber also said there could be a significant correction in gold and other commodities as the dollar changes course. However any large decline would represent a buying opportunity, he argues.

Monday, October 18, 2010

Paul Krugman thinks we need more QE. Not just a little bit more. About 8-10X more than current projections! Richard Koo’s head must be spinning. No, no, we haven’t failed, it’s just that we haven’t tried hard enough! Krugman’s idea is the equivalent of a shopkeeper who thinks he can scream about the loads of new apples he is putting on the shelves while creating a stir in the marketplace that will ultimately result in higher sales. It won’t work in the long-run.

Of course, this is all very ironic given Mr. Krugman’s most recent commentary regarding Mr. Bernanke’s lecturing of Japanese officials:

“American officials used to lecture other countries about their economic failings and tell them that they needed to emulate the U.S. model. The Asian financial crisis of the late 1990s, in particular, led to a lot of self-satisfied moralizing.”

Mr. Krugman used to lecture the Japanese quite a bit. In a 1999 piece Mr. Krugman discussed the ways in which QE could help the Japanese economy. He wrote:

“Quantitative easing: There has been extensive discussion of “quantitative easing” , which usually means urging the central bank simply to impose high rates of increase in the monetary base. Some variants argue that the central bank should also set targets for broader aggregates such as M2. The Bank of Japan has repeatedly argued against such easing, arguing that it will be ineffective – that the excess liquidity will simply be held by banks or possibly individuals, with no effect on spending – and has often seemed to convey the impression that this is an argument against any kind of monetary solution.”

Saturday, October 16, 2010

Those of you who follow this blog will have noticed that I have not been posting as often as was my norm. I have instead been increasing my participation in Google Buzz and if you are interested you will find me there. I am still also active on Twitter as Weskus.

Sunday, October 3, 2010

THE government is pulling a sheet over TARP, the Troubled Asset Relief Program created during the panic of 2008 to bail out the nation’s financial institutions. With the program’s expiration on Sunday, we can expect to hear lots of claims from the folks at the Treasury that it was a great success.

Such assertions would be no surprise from a political class justifiably concerned about possible taxpayer unhappiness, the continuing economic turmoil and the midterm elections. But if we have learned anything during this crisis, it is that the proclamations emanating from the Washington spin machine must be taken with an extra-hefty grain of salt.

Consider the claims made last summer that the Dodd-Frank financial reform act reduces the threats that large, interconnected banks pose to taxpayers and the economy when the banks are deemed too big to fail. Indeed, as regulators hammer out the rules governing derivatives transactions, it’s evident that the law has created a new set of institutions that will almost certainly be deemed too important to fail if they ever get into trouble. And that means there won’t really be an effective way to keep those firms from taking big, profitable, short-term risks that are dumped on the taxpayers when the bets fail.

Our roster of bailout candidates includes the clearinghouses, created under Dodd-Frank, that are meant to increase the oversight of derivatives trading. Because most derivatives transactions are expected to go through these clearinghouses, they will be “systemically important” under the law. As such, Dodd-Frank specifically provides that “in unusual or exigent circumstances,” the Federal Reserve may provide such entities with a financial backstop, including borrowing privileges.

Friday, October 1, 2010

The Wall Street Journalreports that municipalities all over the nation are teetering on the verge of bankruptcy ("Local Debts Defy Easy Solution," September 23). This may be the final proof that the ongoing financial crisis is not a crisis of free markets, as populist politicians and media have characterized it. The municipal debt crisis is a political crisis, one created by politicians making bad decisions with taxpayer money in order to funnel it to their cronies and supporters.

Why are municipalities in so bad a position? For the most part, because of deals cut with public employee unions. One of the prime benefits a labor union brings to its members is a fat pension plan that, in theory, is generously funded by the citizens of the municipality the union members work for.

For union-friendly politicians, this was a sweet deal. They could reward their labor supporters with generous benefits, while passing the buck of raising taxes to pay for those benefits on to their successors years into the future. Now those bills are coming due. As the Journal says, state and local pension plans "have promised over $3 trillion in retirement benefits," while their pensions assets "are at least $1 trillion shy of that." California's pension shortfall is larger than the GDP of Saudi Arabia, oil riches and all.